Kurdistan Business Law Breakfast Seminar Dubai Capital Club 1 - PowerPoint PPT Presentation

Kurdistan Business Law Breakfast Seminar – Dubai Capital Club 1 November 2018 Dubai Capital Club Omar Aqrawi Attorney at Law T: +964.750.346.0444 M: +964.750.425.4767 omar@amereller.com World Trade Center, Gulan Tower Floor 10 – No.4 Erbil, Kurdistan Region, Iraq Baghdad | Basra | Berlin | Cairo | Damascus | Dubai | Erbil | Munich | Ras Al Khaimah | Tripoli b Pillsbury Winthrop Shaw Pittman LLP www.amereller.com

Today’s Presentation Topics 1. What is Kurdistan? 2. Legal System 3. Company Law and Foreign Investment Law 4. Oil and Gas Law 5. Commercial Agency Law 6. Labour Law 7. Tax Law and Social Security b 2

About AMERELLER  AMERELLER is an international law firm with a focus on the Middle East.  11 offices across the region.  More than 70 lawyers  Lawyers fluent in all regional languages.  Firm ranked as tier one in lawyer rankings in many of our AMERELLER Office core regions (including Iraq) b 3

What is Kurdistan? (1)  1992 de facto autonomy  2005 legal autonomy  “Federal region” with four provinces, referred to as Kurdistan Regional Government (“ KRG ”)  Separation of powers - executive, legislative, and judicial powers  Democratic elections  Parliamentary representatives from main Kurdish political parties and minorities  Head of Government - Prime Minister  23 Ministries, plus Department of Foreign Affairs (technically not a “Ministry”) b 4

What is Kurdistan? (2) Political Economy Overview  Gateway into Iraq  Safety and security  Ease of access  Population: 5.1 million  GDP: approx. US$23.6 billion  2005 – 2014: economic growth  2014 – 2018: challenges (ISIS and drop in oil price) Erbil - capital of the Kurdistan Region  From 2018: signs of growth! ISIS essentially defeated and improving relationship with Baghdad b 5

What is Kurdistan? (3) Federalism in the Constitution  2005 Constitution established Federal system  Gave Kurdistan power and regional independence  Balance between “exclusive” and “shared” competencies Regional Government Federal Government Shared Competencies (KRG) National Security Policy Manage Customs All other matters Fiscal and Customs Policy Regulate electricity Foreign Policy Regulate internal water sources Policies relating to water sources from outside Iraq Manage “present” oil fields Issues of citizenship, asylum, etc.. Telecommunications policy b 6

Legal System (1) Commercial Legal Framework  KRG and Iraq mainly identical commercial legal framework  Important exceptions Federal Law that applies in Repealed Federal Law that still Kurdistan Specific Laws Kurdistan applies in Kurdistan 1951 Civil Code 1987 Labour Law 2006 Investment Law 1971 Social Security Law 1989 Regulation regarding 2007 Oil & Gas Law Representative Offices and 1984 Commercial Code 2011 NGO Law exemption Branches 1997 Companies Law 2000 Commercial Agency Law Amendments: a. Property rent law clauses b. Penal code clauses c. Social security law clauses b 7

Legal System (2) Dispute Resolution Court of Cassation - Erbil Court of Appeal Criminal Court First Instance – Personal Affairs Investigation Labour Court Civil Court Court Court b 8

Legal System (3) Court Litigation Experience Language  First instance courts  Kurdish - submissions and proceedings  Arabic – court’s judgment  Court of Appeals and Court of Cassation  Kurdish and Arabic - submissions and proceedings  Arabic – court’s judgment Time Frame  Civil or commercial dispute - 6 months to 2 years  Labour case - 3 months to 1 year b 9

Legal System (4) Arbitration  Arbitration clause is common in commercial contracts  1983 – Riyadh convention is ratified and applied in Kurdistan  2015 – Iraq joined the ICSID Convention  2018 – Iraq signed the 1958 New York Convention, ratification is pending in the Iraqi Parliament.  Foreign arbitral awards may be enforced by Kurdish courts but judges will review certain conditions such as:  Not contrary to public order  No Kurdistan court judgment contrary to the award  Parties were duly notified b 10

Companies Law  1997 Companies Law applies in Kurdistan and mainland Iraq  Registration of legal presence in Iraq required LLC Branch  Takes longer to establish  Easier to establish  Initial capital required  4-6 weeks (minimum USD 850)  Parent company will be fully and  4-8 weeks directly liable for the branch  Liability shield  Governance can be more burdensome (regular need for foreign resolutions  Governance simplified to be notarized) b 11

Foreign Investment Law and License  2006 Investment Law for the Kurdistan Region  791 licenses granted by the Kurdistan Region Board of Investment  100% foreign shareholding of a company allowed (like Federal Iraq)  Property ownership allowed (unlike Federal Iraq)  Employment of foreign staff generally allowed  Equal treatment under the law of foreign and national investors  Tax incentives and benefits:  tax exemption benefits;  exemption from import duties;  access to land; and  ownership and easy transfer of capital. b 12

Oil and Gas (1) Developments - Kurdistan Estimate of reserves of 41 billion barrels of oil and natural gas liquids and 54 trillion cubic feet of gas. Middle East Economic Survey (MEES) 2018 b 13

Oil and Gas (2) Overview - Kurdistan  Ministry of Natural Resources (MNR) oversees oil and gas matters  Oil and gas matters not expressly enumerated as federal, local, or shared, and are to be administered “ in co-operation ”  Much debate on the form of cooperation  Constitutional matters  Article 111: Hydrocarbons are a national asset and belong to the Iraqi People  Article 112: Federal Government has management control over oil and gas extracted from present fields with the regional governments  Key question: What is a “present field”?  No federal oil and gas law in Iraq  2007 - KRG passed legislation to govern petroleum operations  Based on Kurdish interpretation of the Constitution b 14

Oil and Gas (3) Production-Sharing Contracts (PSC)  2007 KOGL – Oil and Gas Law of Kurdistan Region of Iraq  More than 50 PSCs signed between IOCs and KRG  MNR discretion to invite applicants for licensing or direct negotiation  No restrictions on exploration, development and production Mainland Iraq Technical Service Contract (TSC) and KRG Production Sharing Contract (PSC) Development and Production Services Contracts (DPSC)  Signed with the MNR  Signed with the federal Ministry of Oil  Provides the contractor with a share  Provide fixed per-barrel price in the petroleum discovered and value produced regardless of international oil prices  Increase in profit as oil prices rise b 15

Oil and Gas (4) Gas Resources Kurdistan is rich in gas resources  More non-associated gas than in mainland Iraq  Gas production in Kurdistan currently entirely for domestic use  Major lack of power generation in Federal Iraq  Ideally, Kurdistan could supply gas for power generation in Federal Iraq  Complications: lack of pipeline infrastructure and political issues b 16

Commercial Agency Law (1) Overview Law No. 51 of 2000 (“KRG CAL”) Law No. 79 of 2017 (“New CAL”) KRG Mainland Iraq  New Law not being reviewed by the Kurdish Parliament b 17

Commercial Agency (2) How Necessary is an Agent?  Discrepancy between law and practice  KRG CAL : “An agent must register and obtain a license in the form of a certificate issued by the Registrar of Companies.”  Reality: Kurdish authorities do not require agent registration  Registration provides ability to prevent parallel imports for some products b 18

Commercial Agency (3) Registration  The KRG CAL as applied in Kurdistan - commercial agent should be:  Iraqi citizen;  at least 25 years of age; and  a member of one of Kurdistan’s Chambers of Commerce.  An agent must also:  fulfill certain requirements (e.g. not convicted of certain crimes);  carry out the commercial agency within Kurdistan; and  not be an employee in the public sector;  etc. b 19

Commercial Agency (4) No Agent Protections No Exclusivity Requirement  Neither Commercial Agency Law nor the Civil Code require exclusivity  Exclusivity left to agreement between parties No Statutory Restriction on Termination  Agents do not have protection from termination or rights to compensation for termination or non-renewal, unlike many other MENA countries  Key terms for an agency or distributor contract should expressly provide for termination:  fixed sales targets, and right to terminate for failure to meet target  fixed term contract, with no automatic renewal without agreement b 20

Labour Law (1) Overview  1987 Labour Law applies in Kurdistan Gap between written law and actual practice:  Article 23: No foreign worker may be engaged before having received a work permit.  Reality: Foreign workers are regularly employed in Kurdistan without obtaining a work permit. b 21